Are claims in medical malpractice insurance leveling off?
Watching the trends in medical malpractice claims over the last several years has been pretty simple: frequency of medical malpractice claims were reducing, faster than the average increase in the expense of defending them, which pushed premiums down across the nation. The only trend to predict was how low will the rates go?
Reading World News Report and Crittenden Medical Insurance News I see as of the July and August issues of this year, the experts who track such things are predicting some market firming. Prices may actually increase.
Tighten Underwriting Standards
Some Carriers writing medical malpractice insurance and related insurance products will first tighten underwriting guidelines, then raise rates and increase reserves. The majority of the industry is still showing strong surplus accounts, which will allow the premiums to remain flat. Premium will eventually increase after perhaps one or two years of taking from the insurance carriers surplus’ in order to support rates, combined with increasing pressure on the number of claims filed per year, and the average cost of defending and settling those claims,.
Defense Expenses are rising:
The Department of Health and Human Services has researched the claims and shown that the cost of defense is on the rise. Using some data available from the PIAA Physicians Insurers Association of America's Data Sharing Project, the average indemnity rose almost from $174,260 in 1985 to $342,670 in 2008. Meanwhile, the average expense went from $13,395 to $43,258. And, not surprisingly, Claims resulting in plaintiff verdicts had the highest average. Over a period of 20 plus years, the amount of expenses as a percentage of the total cost of the claim (settlement) has increased. While medical malpractice insurance premiums appeared to have leveled for approximately seven to eight years, no one has looked at the impact of defense expenses, also called "allocated loss adjustment expenses" (ALAE), on the total costs of malpractice insurers.
Physicians are finding other means of revenue:
The reduction in rates across almost all specialties has been welcome good news in a time when we have seen physicians struggle with diminished reimbursements. One plastic Surgeon recently closed his large office, rented a small space in a larger medical group so that he could continue the reconstructive work on children that is such a rewarding part of his training and commitment and skill. The ‘big money’ elective cases may come, and for now, his reaction to a reduced reimbursement market is to work hard to keep his practice open in the community.
Some physicians are retiring early, others merging their practices, selling to large medical groups or innovating by providing elective aesthetic procedures and taking on medical directorships and or performing reviews for workers comp carriers. Physicians have survived, many are growing these ‘additional services’ and entrepreneurial ‘sides’ of their medical practices to levels where they their conventional practices are producing less of their income.
Our office has assisted physicians in finding miscellaneous medical malpractice insurance. If the additional business from these extra services can sustain and grow, this will allow them to remain in practice, solo or in smaller groups. In the long run, many feel that this is the business, professional life that they prefer: to use the skill and clinical experience obtained from years of study with more autonomy. Ultimately, the decision has to make sense financially; and miscellaneous professional liability policies must cover the medical director work, expert witness work, at home elder care, hospice, and contract hospitalist; from Medispa’s to Urgent Care services, from the Pharmacy clinic’s appearing more and more to the research for the Pharmaceutical Company, The Doctors’ Insurance Agency will work to find the right Carrier with the knowledge and understanding of the risk.